Internet sales tax

We all know that one day the Feds will enact the “Main Street Fairness Act.” or something similar. Currently there has not been any action on this legislation by Congress. Until they act, more and more states are going to be attempting on their own to collect these internet taxes.
Question.
My supplier has a "nexus" in 36 states, how do I inset that many tax zones into my oscommerce shop configuration?
Has anyone heard of or used a service (called TaxCloud)as I understand, it enables merchants to accurately calculate local sales tax. The service is completely free to merchants.

When you say "My supplier", does that make you legally bound to collect sales tax in those 36 states? It depends, on a state-by-state basis, whether you are acting as an "agent" for them, or if they are drop-shipping for you, or what the situation is. If they merely wholesale to you, and you do the selling and shipping to customers, you would only have to collect sales tax for the state(s) in which you have a nexus yourself (your wholesale supplier doesn't enter into the picture). It gets more complicated if they are shipping direct to your customers (drop ship), or if you are an agent driving business to them and collecting a commission (in which case, you may be able to defer sales tax calculations to your supplier's site). Unless this is the first time they've entered into such a sales program with Web sellers, they should be able to tell you where and how you have to collect sales tax -- don't assume that simply because they have warehouses in 36 states that you have to collect sales tax in all 36 -- it depends on state sales tax laws.

If you do have to collect and remit sales tax in all 36 states, you're going to have a job on your hands. Different states have different rules for everything. Some will let you look up by ZIP Code, while others require a specific address to tax jurisdiction mapping. Some provide online address or ZIP lookup services, while for others you're on your own (find a commercial service to do it for you). Some even let you use one rate (the location of the shipping point) rather than the destination address. And of course, there's no consistency on what products are taxable and which aren't (even within one state)! In one state, a single can of soda might be taxable in one jurisdiction, and not in another, while a six-pack is taxable in both. In some states, candy or snacks are taxable, while in others they're considered non-taxable food.

If states don't get their act together (ha!) and harmonize their sales tax collection process (uniform rules) so it's easy for online merchants to figure out tax rates that apply, and do something to enforce sales tax collection on out of state orders, they're going to watch all their brick and mortar stores fail, causing massive economic disruption. Right now, all states with sales taxes rely on voluntary reporting and remittance of "use tax" for out of state sales to their residents. That's right -- shopping out of state (Web, phone, mail) is not tax free, but most people are evading the law by refusing to report purchases.

I would think that osC could handle 36 tax zones, although I haven't tried that many myself. Third party tax calculators might be a solution, although that would probably take some modifications to osC to invoke their services.

It is timely that you are asking this question now because we are currently finishing up a TaxCloud implementation into osCommerce. It is a pretty straightforward process. I actually work for FedTax (the creators of TaxCloud) and I would be happy to help you set this up.

As you may have already read, TaxCloud works as a web service so it provides a real-time lookup of the correct local sales tax rate for each item in the cart (to ensure your customers benefit from any possible exemptions). We also keep track of the taxes collected and for the 24 streamlined states, we also prepare and submit your tax returns, remit the proceeds to the states directly, and we even take primary responsibility in the event of a jurisdictional audit. You are correct - TaxCloud is a free service.

And yes, these calculations are very complicated and vary by zip code and type of product but fortunately we have all this information in our database so you don't need to worry about maintaining this.

Let me know if you would like some help setting this up.

Edited by Jan Zonjee, 28 December 2010 - 12:41.thanks for not spamming the forums

When you say "My supplier", does that make you legally bound to collect sales tax in those 36 states? It depends, on a state-by-state basis, whether you are acting as an "agent" for them, or if they are drop-shipping for you, or what the situation is. If they merely wholesale to you, and you do the selling and shipping to customers, you would only have to collect sales tax for the state(s) in which you have a nexus yourself (your wholesale supplier doesn't enter into the picture). It gets more complicated if they are shipping direct to your customers (drop ship), or if you are an agent driving business to them and collecting a commission (in which case, you may be able to defer sales tax calculations to your supplier's site). Unless this is the first time they've entered into such a sales program with Web sellers, they should be able to tell you where and how you have to collect sales tax -- don't assume that simply because they have warehouses in 36 states that you have to collect sales tax in all 36 -- it depends on state sales tax laws.

If you do have to collect and remit sales tax in all 36 states, you're going to have a job on your hands. Different states have different rules for everything. Some will let you look up by ZIP Code, while others require a specific address to tax jurisdiction mapping. Some provide online address or ZIP lookup services, while for others you're on your own (find a commercial service to do it for you). Some even let you use one rate (the location of the shipping point) rather than the destination address. And of course, there's no consistency on what products are taxable and which aren't (even within one state)! In one state, a single can of soda might be taxable in one jurisdiction, and not in another, while a six-pack is taxable in both. In some states, candy or snacks are taxable, while in others they're considered non-taxable food.

If states don't get their act together (ha!) and harmonize their sales tax collection process (uniform rules) so it's easy for online merchants to figure out tax rates that apply, and do something to enforce sales tax collection on out of state orders, they're going to watch all their brick and mortar stores fail, causing massive economic disruption. Right now, all states with sales taxes rely on voluntary reporting and remittance of "use tax" for out of state sales to their residents. That's right -- shopping out of state (Web, phone, mail) is not tax free, but most people are evading the law by refusing to report purchases.

I would think that osC could handle 36 tax zones, although I haven't tried that many myself. Third party tax calculators might be a solution, although that would probably take some modifications to osC to invoke their services.

Thanks for the reply. Mr. PhilWhen I said "My Supplier" Yes it does make me legally bound to collect sales tax in those 36 states, because my supplier has a presence in that many states, they are charging me sales tax for the shipping address of my orders, for instance, my office is in Tennessee, last month I received an order from NC, I forwarded the order with my main supplier in Baton Rouge La, the ordered item was out of stock, Baton Rouge ordered the item from their Dallas warehouse, The order was shipped from Dallas to North Carolina, I was charged North Carolina sales tax. I did not charge sales tax and lost $72.00. BTW: the supplier has a nexus in NC also; therefore he has to charge sales tax for that state.I want to be able to charge the tax in my oscommerce tax module; As of late, I had to raise my product prices 10% to cover the sales tax therefore making my products much higher than my competition. I know each state has different laws regarding sales tax, no one has read more about this subject so I am well versed on this tax.

I need to be able to charge my customers the right sales tax for their shipping address (not billing), and then pay that tax to my supplier when I’m billed. I don’t want to have to pay the tax to each state, let the supplier do that, it makes it much simpler. We will some day pay sales tax to all states as soon as the states can come up with a program where each will get their rightful share. I understand the brick and mortar shops having to pay sales tax and now most Internet sites don’t but that is going to change.

It is timely that you are asking this question now because we are currently finishing up a TaxCloud implementation into osCommerce. It is a pretty straightforward process. I actually work for FedTax (the creators of TaxCloud) and I would be happy to help you set this up.

As you may have already read, TaxCloud works as a web service so it provides a real-time lookup of the correct local sales tax rate for each item in the cart (to ensure your customers benefit from any possible exemptions). We also keep track of the taxes collected and for the 24 streamlined states, we also prepare and submit your tax returns, remit the proceeds to the states directly, and we even take primary responsibility in the event of a jurisdictional audit. You are correct - TaxCloud is a free service.

And yes, these calculations are very complicated and vary by zip code and type of product but fortunately we have all this information in our database so you don't need to worry about maintaining this.

Yes, I have read about TaxCloud and how it works, watched the demo, I was wondering if anyone had used it in their oscommerce sites, I'm not sure Tax Cloud would work for me because I want my supplier to collet and pay the sales tax, I'm willing to charge the tax on my site and pay it by invoice to my supplier, but I can't find a way to do that just yet.

OK, now I understand your problem a bit better. It is possible to just use the tax look-up part of TaxCloud without the collection and remittance portion. We haven't done an implementation that way but it is possible.

To my knowledge no one is currently using TaxCloud with osCommerce, which is why I am working on the reference implementation. We want to make it as easy as possible for people to get set up with TaxCloud.

Yes, I have read about TaxCloud and how it works, watched the demo, I was wondering if anyone had used it in their oscommerce sites, I'm not sure Tax Cloud would work for me because I want my supplier to collet and pay the sales tax, I'm willing to charge the tax on my site and pay it by invoice to my supplier, but I can't find a way to do that just yet.

OK, so your supplier is drop-shipping directly to your customers, and in states where they have a nexus (physical presence) someone is required to collect sales tax? That will depend on that state's tax laws. You're the one making the sale and collecting payment from the customer, so it sounds like you're the one responsible for collecting sales tax. Do you have to pass it on to your supplier, rather than directly remitting to the state? If you have to go through the trouble of figuring out the correct sales tax rate(s), and collecting from the customer, I would think it just as easy to remit it yourself and just pay wholesale and shipping to your supplier. I suppose that the state is happy so long as someone collects and remits the sales tax (as you can't depend on customers to pay use tax).

If your supplier did all the billing and collected payment from the customer (you merely act as agent and direct customers to their site for the sale), it would make sense to have them calculate, collect, and remit sales tax. My point is that if you are doing the first two steps yourself anyway, it's not much effort to do the remitting yourself, too, rather than passing on the tax to the shipper (about the same amount of paperwork either way). Whatever that state's tax laws require... if the shipper has to be the one that remits the sales tax, so be it. Anyway, be sure to confirm for each state that drop-shippers with a nexus in a state mean sales tax has to be collected -- you may find some states that don't require sales tax in such cases (relying on use tax instead). And as I said before, what's taxable at what rate and which tax jurisdiction to use can vary wildly by state. Maybe someone like TaxCloud can do it for you. (I wonder what their business model is, if the service is free to you.)

I took another look at this. TaxCloud is definitely able to provide tax calculation and reporting for your website for 36 states. (Remittance is optional). This is exactly the same as the standard process except that we don't collect any funds from you. I have a demo site running which does exactly this.

Figuring out how to make this work just using osCommerce (without TaxCloud) would be much more complicated. You would need many more tax zones than 36. Each state can have many tax zones within it, and the rates can vary by product. There are also sales tax exemptions and sales tax holidays. This can change fairly often as well. A third-party provider (such as TaxCloud) would keep track of this information and update it automatically.

And to answer your question Phil about our business model - our service is entirely free to merchants. We are paid a very small commission by the states for the amount of sales tax we help merchants collect and remit. And our service relies on cloud computing to keep our operational costs low enough to survive only on our state-provided compensation. This model makes it easy for merchants to get started collecting sales tax.

I took another look at this. TaxCloud is definitely able to provide tax calculation and reporting for your website for 36 states. (Remittance is optional). This is exactly the same as the standard process except that we don't collect any funds from you. I have a demo site running which does exactly this.

Figuring out how to make this work just using osCommerce (without TaxCloud) would be much more complicated. You would need many more tax zones than 36. Each state can have many tax zones within it, and the rates can vary by product. There are also sales tax exemptions and sales tax holidays. This can change fairly often as well. A third-party provider (such as TaxCloud) would keep track of this information and update it automatically.

And to answer your question Phil about our business model - our service is entirely free to merchants. We are paid a very small commission by the states for the amount of sales tax we help merchants collect and remit. And our service relies on cloud computing to keep our operational costs low enough to survive only on our state-provided compensation. This model makes it easy for merchants to get started collecting sales tax.

Thanks DaveYour right many more zones exist, I want to look into this further, I would want to know how to implement Tax Cloud into an oscommerce site. Lets keep in touch and I'm sure we can use your services.

OK, so your supplier is drop-shipping directly to your customers, and in states where they have a nexus (physical presence) someone is required to collect sales tax? That will depend on that state's tax laws. You're the one making the sale and collecting payment from the customer, so it sounds like you're the one responsible for collecting sales tax. Do you have to pass it on to your supplier, rather than directly remitting to the state? If you have to go through the trouble of figuring out the correct sales tax rate(s), and collecting from the customer, I would think it just as easy to remit it yourself and just pay wholesale and shipping to your supplier. I suppose that the state is happy so long as someone collects and remits the sales tax (as you can't depend on customers to pay use tax).

If your supplier did all the billing and collected payment from the customer (you merely act as agent and direct customers to their site for the sale), it would make sense to have them calculate, collect, and remit sales tax. My point is that if you are doing the first two steps yourself anyway, it's not much effort to do the remitting yourself, too, rather than passing on the tax to the shipper (about the same amount of paperwork either way). Whatever that state's tax laws require... if the shipper has to be the one that remits the sales tax, so be it. Anyway, be sure to confirm for each state that drop-shippers with a nexus in a state mean sales tax has to be collected -- you may find some states that don't require sales tax in such cases (relying on use tax instead). And as I said before, what's taxable at what rate and which tax jurisdiction to use can vary wildly by state. Maybe someone like TaxCloud can do it for you. (I wonder what their business model is, if the service is free to you.)

Right now I'm steering blind as I don't know what the tax will be until I recieve an invoice from my supplier, remember I said I had to raise my prices to cover the hidden taxes, so far it has worked for me, Tax Cloud is something I will look into further, I think it will work for tax collections and get me out of the dark.

Wally, that's great! I will contact you offline. The basic installation steps are to create a merchant account at TaxCloud.net and then install the TaxCloud module. The module installation is in the form of a zip file which contains the TaxCloud php files, along with some modified osCommerce php files. Since we are overwriting some files it is necessary to back up the cart code first. After installation you can configure TaxCloud from within the osCommerce admin site. Configuration consists of entering your merchant account information into a form. That's it!

Thanks DaveYour right many more zones exist, I want to look into this further, I would want to know how to implement Tax Cloud into an oscommerce site. Lets keep in touch and I'm sure we can use your services.

OK, now I understand your problem a bit better. It is possible to just use the tax look-up part of TaxCloud without the collection and remittance portion. We haven't done an implementation that way but it is possible.

Hi Dave,

So if I understand your response above, we are allowed according to the terms of use to only use the tax-lookup feature? Is this a violation of the terms of use?